Inventory89

Reorder Point Calculator and Formula Guide

Posted by Thomas WongLast Updated May 15th, 2025
— 11 minutes reading

Key takeaways

  • The reorder point formula is: (average daily unit sales × delivery lead time) + safety stock.
  • Businesses that use reorder points see a reduction in stockouts and overstocking, which reduces unnecessary shipping costs and improves inventory forecasting.
  • You can calculate average daily sales by dividing the total units sold over a specific period by the total number of days.
  • Average delivery lead time is determined by tracking past purchase orders, considering variations due to order size or seasonality. It can be calculated by adding up the total lead time in days over the past 6 months to a year and dividing by the number of shipments.
  • Safety stock is an integral part of proper inventory management. It accounts for unexpected spikes in demand or shipping delays. You can calculate your safety stock by calculating the difference between maximum and average lead times.
  • Combining accurate reorder points with safety stock helps optimize inventory flow, reducing costs and improving customer satisfaction.

No matter what type of business you’re in, it’s essential to maintain healthy levels of key inventory. Stockouts can lead to lost sales, diminished customer trust, and a tarnished brand reputation, while overstocking ties up capital and potentially incurs additional storage costs.  

This is why it’s important to calculate accurate reorder points for your inventory. By correctly determining when to replenish inventory, your business can maintain a smooth operation, meeting customer demand promptly and efficiently. However, before getting started, it’s crucial to understand exactly why reorder points are useful and what information is needed to calculate them.

Reorder Points and Safety Stock | Secret Life of Inventory

Reorder point calculator 

Are you trying to figure out the reorder point for your items? Calculating reorder points manually can be tedious, especially if you’re doing it for multiple types of inventory. Fortunately, instead of doing the math yourself, you can just plug some numbers into our reorder point calculator!

Reorder point calculator

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What is a reorder point? 

The reorder point is the minimum stock level a specific product can reach before you’re prompted to order more inventory. In other words, it lets you know the lowest stock level you can hit before you need to place a new order.

A reorder point is not a static number; it’s based on your purchase and sales cycles and varies by product. Once you have a handle on the inventory turnover patterns of a product, you’re ready to start putting the variables together. 

The reorder point formula and how to calculate it 

The formula and calculation for a reorder point work out like this:

reorder point formula:
(average daily unit sales x delivery lead time) + safety stock

(average daily unit sales x the lead time in days) + your safety stock = your reorder point 

This formula takes three things into account. The first is how quickly the item is selling. The second is how long it takes to get more of that item. And finally, the third is the safety stock you should keep on hand, just in case. To illustrate, we’ll look at each of these variables in a little more detail: 

Calculating average daily unit sales 

The average daily unit sales is the quantity of an item you sell daily. To calculate this, take the amount of how much the item sells and divide it by a certain time period. 

For example, if you sold 500 basketballs in a month with 31 days, your average daily unit sales would be 500/31, which amounts to 16.12 basketballs each day. You don’t have to round to an even number, and selling less than one unit a day is perfectly fine. Conversely, if you only sold 10 basketballs in a 31-day month, your average daily unit sales would be 0.32 basketballs a day. 

Calculating average daily sales to use in reorder point formula:
Jan. 65 sales + Feb. 70 sales + March 45 sales = 180 sales
180 sales / 90 days = 2 sales average

Calculating lead time in days 

The lead time is the amount of time in days it takes from when you order stock to when it’s delivered to you. To calculate this, look at your past purchase orders and see how long it took for the items to arrive at your door.

For example, let’s assume that of your past 10 shipments, 5 took 3 days to arrive (3 days x 5 shipments = 15). The other 5 shipments took 4 days to arrive (4 days x 5 shipments = 20). If you add up all those days and divide them by the number of shipments, that’s your lead time. 

In this example, take 35 and divide it by 10 — this results in a lead time of 3.5 days. The lead time doesn’t have to be exact; you just have to base it on your experience. 

Calculating lead time:
Jan. 80 pcs 7 days
Feb. 80 pcs 5 days
Mar. 50 pcs 3 days
15 days / 3 orders = 5 days lead time

Calculating safety stock 

Safety stock is what you keep on hand for those “just-in-case moments.” For this reason, you should think of this as the minimum amount of stock you want to be available in your inventory. 

The formula for calculating safety stock is as follows: 

(maximum daily sales x maximum lead time) – (average daily sales x average lead time) = safety stock

To illustrate, we’ll continue to use the basketball example. Let’s say that your historical data shows your top sales on basketballs in a single day was 4, and the longest you waited for a shipment was 10 days (4 x 10 = 40). 

You also calculate that your average daily sales over a year for basketballs is 2, and you wait, on average, 6 days for a shipment to arrive (2 x 6 = 12). In this case, your safety stock would be 28 (40 – 12 = 28).

When setting your safety stock, you should also consider certain things like delivery delays, seasonality, or damage due to inventory transit. Just like the lead time, look at your past purchase orders and see what factors usually affect the delivery time of your items, and adjust your safety stock accordingly. 

Reorder Point Formula:
(Average daily unit sales x delivery lead time) + safety stock = reorder point
ex. (2 x 5) + 28 = 38

The reorder point formula video

If you’re the type who likes to watch instead of read, we’ve created a video version of this post. The examples are slightly different, but the formula is the same. Peter covers the reorder point formula in just three minutes:

The Reorder Point Formula | inFlow Inventory

Why is the reorder point calculator so valuable?

There are several reasons why it’s important to know your reorder point for each and every one of your products. Here are just a few reasons why it’s so important: 

  • Prevents stockouts: Stockouts are a business’s worst enemy. Not only do they result in lost sales, but they also lead to dissatisfied customers. By using a reorder point calculator to improve inventory accuracy, businesses can ensure they can always meet customer demand.
  • Prevents overstock: The flip side of stockouts is carrying excess inventory. The carrying costs associated with excess inventory add up more quickly than you may realize — they’ll also eat into your bottom line while undermining efforts to reduce your environmental impact
  • Reduces disruptions: If you’re a manufacturer, running out of inventory could potentially cause your operation to come to a screeching halt. For this reason, a reorder point calculator can be helpful to minimize the amount of downtime you experience.
  • Reduces waste: Every industry could benefit from reorder points, but none more than those dealing with perishable goods. Proper reorder points could save you thousands on potential waste if you’re managing inventory with a lot number, batch number, or expiration date.
  • Lowers shipping costs: By setting proper reorder points, you can avoid the need for frequent orders, which will save you in shipping costs over time.
  • Improves forecasting: With accurate reorder points, you’ll be able to anticipate your business needs, ultimately leading to less rushed orders or last-minute panic buying. Overall, your demand forecasting will improve.

Something to note — reorder points are great, but they’re just one part of a much larger picture. For well-rounded inventory management, you should also consider implementing things like cycle counts and barcodes. 

What can I do with a reorder point calculation? 

Now that you know the reorder point formula, you can use software to show you exactly when you need to order more. While you might be able to create something yourself using an inventory template, inFlow makes managing your stock much more effortless. inFlow has a Reorder Stock screen that lets you know what you’re running low on and how much to reorder. 

Managing inventory across multiple locations? No problem. inFlow has the power to set different reorder points based on location. This allows your individual locations to have more autonomy when reordering and still enables you to track your inventory company-wide. 

How do I set up reorder points? 

Reorder points are vital to keeping your business running smoothly, but they’ll only work if you’re prepared to reorder on time. You can set up a formula somewhere in your inventory list with the reorder point formula, so you can make quick calculations for your products individually. 

If you’re a spreadsheet user, you can use conditional formatting for the quantity value of specific cells. You can set Excel or Google Sheets so that cells turn red when they hit a reorder point. This will effectively warn you when you need to start on a new purchase order. You can also set up a formula somewhere in your inventory list with the reorder point formula, so you can make quick calculations for your products individually.

inFlow helps you quickly reorder based on reorder points!

We know it can be challenging to keep track of all these formulas, so we decided to create a handy Inventory Formula Cheat Sheet with 7 of the most common formulas, which you can download for free anytime.  

We also have a plethora of free-to-download Excel inventory templates, so be sure to check those out if you track your inventory on spreadsheets.  

Reorder faster with inFlow 

Unlike spreadsheets, inFlow was designed specifically for working with inventory. Quantity and reorder point fields are built into the software, which prevents errors and saves our customers a lot of setup time. inFlow also has a Reorder Stock window, which identifies which products need reordering, and creates new purchase orders with just one click. 

If you’d like to implement reorder points with tailored suggestions for your business, we can help with that too! inFlow has a Recommended Reorder Point report that examines your sales data and recommends reorder points for your products. It also factors in goods in transit (GIT), which are products that have been ordered from a vendor but haven’t been received yet. 

Whether you’re just starting out with reorder points or fine-tuning them, inFlow can help! With inFlow, there’s no need for the reorder point formula at all. The best part is that using inFlow can help with so much more than just reorder points. 

inFlow can recommend reorder points based on your data.

inFlow integrates with over 95 different applications, such as Shopify, Amazon, and QuickBooks Online, to name just a few. If you want to set up a complete barcoding system, inFlow can do that too! Read our Ultimate Barcoding Guide to learn about barcodes and how to start barcoding your business.

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